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Bailes v. Lineage Logistics, LLC

United States District Court, D. Kansas

June 6, 2017

BRYAN BAILES, Individually and on Behalf of All Others, Plaintiff,
v.
LINEAGE LOGISTICS, LLC, Defendant.

          MEMORANDUM AND ORDER

          Daniel D. Crabtree United States District Judge

         Plaintiff Bryan Bailes brings this lawsuit for himself and putative class members alleging that defendant Lineage Logistics, LLC violated the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. §§ 1681-81x (2012). The parties met, negotiated, and agreed to a compromise. On May 9, 2016, they asked the court to approve the result of their efforts: a proposed class settlement. Doc. 24-1. On August 19, 2016, the court denied their motion and gave the parties time to renegotiate certain aspects of their proposed compromise. Doc. 25. The parties again met, negotiated, and agreed to a new proposed class settlement.

         On December 15, 2016, the court preliminarily approved this new proposed settlement agreement (“Proposed Settlement”) and conditionally certified a settlement class. Doc. 32. Almost a month later, the court approved the parties' proposed notice and notice plan. Doc. 35. The parties filed their Joint Motion for Order for Final Approval of Class Action Settlement on April 19, 2017, and the same day plaintiff filed a Motion for Attorney Fees and Costs. Docs. 38, 39. The court held a fairness hearing on April 25, 2017, and is now ready to rule both motions.

         Proposed Settlement and Class Notice Details[1]

         Once the court granted the parties' motion for preliminary approval, the settlement administrator, Analytics Consulting, LLC, began sending the court-approved notice to putative class members. The parties expected the class to consist of 3, 400 members, but the actual number was slightly smaller-3, 356. After the initial mailing, the settlement administrator ran a skip trace and re-mailed notices to 694 class members. The administrator then ran a second skip trace, and re-mailed notices to 29 class members. All told, the parties could not locate 425 of the 3, 356 putative class members. So, all that left 2, 931 members who received actual notice. None of them opted out or objected.

         The parties have agreed to settle the class's claims for a total of $149, 205. They propose to distribute this sum in this fashion: attorney fees and costs of $49, 237 (should the court approve that amount); settlement administrator costs of $16, 500; a $5, 000 incentive award for the named plaintiff, Bryan Bailes; and the remainder, $78, 468, to be divided equally among the 2, 931 class members “to whom notice was sent and not returned as undeliverable.” Doc. 28-3 at 5-6, 8. This formula would provide, if approved, each class member who received notice with about $26.77. If finally approved, the Proposed Settlement requires the administrator to mail settlement checks to all class members “to whom notice was sent and not returned as undeliverable.” Id. at 8. Any checks not cashed within 120 days of issuance would pass to Goodwill Industries International, Inc. as a cy pres beneficiary.

         In addition to the monetary considerations detailed above, the parties have agreed not to publicize the settlement. Plaintiff and all class members also have agreed to release all claims they may have against the defendant based on plaintiff's First Amended Complaint.

         Analysis

         I. Joint Motion for Order for Final Approval of Class Action Settlement

         After reviewing parties' submissions, the court concludes that it cannot currently approve the Proposed Settlement because the information the parties provide is insufficient to allow the court to make the findings necessary for approval. Specifically, the parties' joint motion never asks the court to issue a final class certification order. And the parties did not raise or present evidence on this issue during the April 25, 2017 fairness hearing.

         As the Supreme Court explained in Amchem Products, Inc. v. Windsor, class certification under Federal Rule of Civil Procedure 23(a)-(b) must precede settlement approval under Rule 23(e). 521 U.S. 591, 619-22 (1997); see also Id. at 622 (“Federal courts, in any case, lack authority to substitute for Rule 23's certification criteria a standard never adopted-that if a settlement is ‘fair, ' then certification is proper.”). Here, the court has not issued a final certification order certifying the settlement class. It merely has certified the class conditionally for purposes of sending notice, gathering objections, and laying a foundation for a fruitful fairness hearing.[2] It remains, then, for the parties to seek final class certification.[3]

         Because the parties neither have moved for nor submitted information about final class certification, the court cannot yet certify a class action under Rule 23, and so it cannot grant final approval of the Proposed Settlement. Cf. Gambrell v. Weber Carpet, Inc., No. 10-2131-KHV, 2012 WL 162403, at *3 (D. Kan. Jan. 19, 2012) (denying motion to approve FLSA collective action because the parties did not ask the court to issue a final class certification order and did not provide sufficient information for the court to make a final class certification decision).

         The court presumes that class counsel will cure this omission and promptly file a motion seeking final class certification (and showing why that result comports with the governing law). But another aspect of the Proposed Settlement presents a more vexing problem.

         Under Rule 23(e), any “settlement, compromise or dismissal of certified class claims” requires court approval. Freebird, Inc. v. Merit Energy Co., No. 10-1154-KHV, 2012 WL 6085135, at *4 (D. Kan. Dec. 6, 2012). The court may approve a settlement only if it finds that the proposed settlement “is fair, reasonable and adequate” in all respects. Id; see also Fed. R. Civ. P. 23(e)(2). To determine whether a proposed settlement is fair, reasonable, and adequate, the court considers four factors: (1) whether the proposed settlement was fairly and honestly negotiated; (2) whether serious questions of law and fact exist, placing the ultimate outcome of the litigation in doubt; (3) whether the value of an immediate recovery outweighs the mere possibility of future relief ...


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